Croatia: EU entry leads to rise in demand for holiday homes

Written by Engel & Völkers on 4/8/14

Buyer interest in second homes in Croatia has risen significantly since the entry of the country to the European Union (EU) on 1 July 2013. “In the first quarter of 2014 we registered an increase in enquiries of around 30 percent over the same period in the previous year. Buyers from Germany and Austria in particular are showing an increased interest in exclusive holiday properties on the Adriatic,” said Michael Grimm, Managing Partner of Engel & Völkers in Rab and Opatija. In view of the growth in demand, Engel & Völkers is anticipating significant price rises for second homes in the country’s most popular regions.

This exclusive country house is located on the coast of the Istrian peninsula and consists of four rooms spanning an interior of approx. 136 square metres. The property affords views overlooking sea, which is close by, and is currently for sale through Engel & Völkers for 445,000 euros.

The most sought-after locations for buying a second home include the Opatija Riviera, the Istrian peninsula and the island of Rab. Top-class villas on the Opatija Riviera with particularly exclusive fittings and sea views and located at very good addresses can reach top prices of 1.5 million euros. In good locations villas cost up to 750,000 euros. The peninsula of Istria is also attracting the attention of international buyers. Natural stone houses are in especially high demand here. Prices of as much as 500,000 euros are being paid for exclusive residences in very good locations. Holiday properties on the island of Rab in the Kvarner Bay are also very popular with interested buyers at present. Most second homes on the island are situated just a few metres from the sea and afford views overlooking the islands just off the coast. For detached properties with an interior of approx. 200 sqm in prime locations, buyers are paying between 400,000 and 500,000 euros. Prices per square metre of up to 2,000 euros are being reached for freehold apartments in very good locations.

“Buyers are currently on the lookout, above all else, for prestigious villas in very good locations for up to 750,000 euros. There is a high level of demand too for superior detached properties with an interior of approx. 140 sqm for up to 300,000 euros, and freehold apartments with a very good appointment and an interior of approx. 70 sqm for up to 150,000 euros,” Michael Grimm observes.

Positive factors stimulate the Croatian property market

General factors associated with the purchase of a holiday property in Croatia have changed very much in a positive sense over recent years. The construction quality of properties, for instance, has been improved enormously thanks to foreign investors. “In Istria, on the Opatija Riviera and in neighbouring regions such as Zadar too, more and more exclusive villas and apartments are coming onto the market with a western European standard of building work and a western European look,” Michael Grimm revealed. Additionally, the land register has been transferred to an electronic system, meaning that the official record of ownership is now processed very quickly. This means that buyers from the EU share the same rights with native Croatians in terms of land register law. Since Croatia’s entry to the EU, buyers may now also rent out their holiday homes. “This was not possible previously and is now an especially interesting prospect for investors,” Michael Grimm continued.

This superior stone villa spanning approx. 170 square metres is located on the Istrian peninsula and boasts six rooms. Engel & Völkers is currently brokering the property for a sale price of 695,000 euros.

90 percent of buyers are based abroad

The Croatian property market is currently dominated by buyers from Germany and Austria. Eastern Europeans, and in particular buyers from Slovenia, are also seeking to buy luxury holiday homes in Croatia’s desirable locations. Many enquiries are increasingly coming from interested buyers with Croatian roots based throughout Europe and the USA. Most buyers have sufficient capital at their disposal to not be reliant on any outside financing. This international clientele is especially interested in properties with direct sea views or in close proximity to the sea. Many search clients place particular importance on large balconies and terraces, as well as a western European specification standard. An air-conditioning system, laminate flooring and a modern bathroom are equally important for buyers. Due to the high level of demand from abroad, Engel & Völkers Croatia is forecasting a shorter time to market this year. At present, the time to market in very good locations is two to six months, and four to twelve months in good locations.

Further price rises expected over the coming months

Michael Grimm sees the ongoing development of the residential property market in Croatia in an extremely favourable light. “As a result of EU entry we are registering significantly more viewing appointments and genuine intentions to purchase from foreign buyers. Compared to Spain or Italy, the prices for holiday homes in Croatia in the very best locations are still relatively low. That said, the growing level of demand means that we are anticipating a considerable rise in prices for holiday properties in Croatia over the coming months,” Michael Grimm said.

Croatia is a popular tourist destination amongst European holidaymakers and benefits from its central location in Europe. It is within very convenient and quick reach by car from southern Germany, Austria, Switzerland, Slovenia and Italy. “Second home buyers will find everything here that they require for life in a sunny climate: glorious nature, beautiful coastlines dotted with bays, countless islands just off the mainland, and historic towns and first-class restaurants,” Michael Grimm added on a final note.